Comcast Is Bullish about Its Business Services

Comcast’s Business Services segment

Comcast (CMCSA) is bullish about its Business Services business and is introducing new products in this segment. On May 16, the company announced that it was testing out a “software-defined wide area networking (SD-WAN)” product solution for its mid-sized businesses and enterprises.

The company expects double-digit growth for its Business Services segment for the next couple of years. Comcast’s Business Services segment has three growth engines: small businesses, mid-sized businesses, and enterprises.

Comcast Is Bullish about Its Business Services

Comcast stated during its 1Q17 earnings call that it perceives a lot of opportunity in this market. Currently, the company has 40% penetration for small and medium businesses, 10% market penetration for mid-sized businesses, and market penetration of less than 5% for its enterprise business.

According to Comcast, enterprises present an opportunity of ~$13 billion–$15 billion. Comcast noted that its Business Services segment has been growing by ~$0.75 billion per year over the past few years.

Business Services segment in 1Q17

Comcast’s (CMCSA) Business Services segment had revenues of $1.5 billion in 1Q17, up 13.6% year-over-year. The rise in revenues was primarily driven by an increase in small business customers and growth in its mid-sized business services. Currently, Comcast’s small business clients comprise ~70% of its Business Services revenues and made up 60% of the growth of this segment.

However, Comcast expects that as its market penetration in the small business market improves, revenues from small business clients could slow down.

Comcast makes up 0.89% of the SPDR S&P 500 ETF (SPY), which has an exposure of 4.2% to the computers sector.